The game in question is sufficiently bonkers that at first I thought it was an idea from spoof twitter account @petermolydeux. The game involves tapping on cube to reveal what’s inside. The twist: only the person who performs the last tap gets to see the reveal. The game comes with a default chisel, an iron chisel that is 10x more powerful for 59p and a diamond chisel what is 100,000 more powerful for £50,000.

It is the diamond chisel that Eurogamer called a DLC, and I don’t agree.

What is DLC?

The genesis of DLC lay in traditional boxed retail. Games (almost exclusively PC games) would release physical boxes that were called “expansion packs”. These required the player to own the original game and typically cost les than a brand new title. Titles that I still have sitting in my cupboard include the Marine Mania expansion for Zoo Tycoon that added new sea creatures and water-themed activities and the additional quests and characters that were added to the Baldur’s Gate series with its expansions.

Fast forward to the age of the Internet and publishers making games for consoles were able to get in the act. They were able to extend the lifecycle of each game by adding “downloadable content”, such as new levels, new maps, new story lines or new characters to the game.

What are virtual goods?

Virtual goods, in the popular mind at least, are indelibly associated with Facebook games such as those made by Zynga, with mobile games and with browser games. They include things such as the Smurfberries used to hasten your way through Capcom’s Smurf Village, a virtual farmhouse in Farmville or the 10th Drone in Bigpoint’s Dark Orbit.

They can also exist in console games, whether that be new items or equipment in a traditional game, or virtual items for your Xbox avatar or in PlayStation Home.

Why do you care about the difference?

Both of these items are downloadable. Both could come under the definition of content. Why do I care so much that they are different.

Because they are.

For anyone involved in the business of making games (less in the pleasure of playing them), the distinctions really matter. I’d like to separate the distinctions into marketing/motivation and development cost.

The marketing and motivation of DLC and virtual goods

Downloadable content, historically at least, was all about “content”. It was about providing the user with more environments, more story lines, more animations, more plot and so on. The marketing hook tended to be “you like this game, why don’t you buy more of it”, and players might evaluate DLC in terms of the number of hours of fun it might bring them.

Virtual goods are totally different. I bought a farmhouse in Farmville because my farm didn’t look right without one. Other players might spend money to get ahead of their friends, to show off, for self-expression, for status, for any number of reasons. The reasons have much more to do with an emotional state, much more to do with how the purchase of ownership of the virtual good will make us feel, than in an evaluation of how much gameplay it carries.

(Of course, there are other motivations. The Counterfeit Coin machine in Jetpack Joyride costs 69p and doubles the rate at which I collect coins, or halves the grind. It still feels like a great purchase to me. The motivations are as varied as the audience of each game, and this short post inevitably generalises, but expect more on the topic of emotions and social influence from GAMESbrief this year).

In short, while all marketing aims to appeal to our emotions, virtual goods have to do so in a totally different way to DLC. The entire structure of what motivates people to buy these two different products is different, and hence the marketing needs to adapt.

The development cost of DLC and virtual items

How much does it cost to make a virtual good? In one week in 2007, Kart Rider is rumoured to have made $2 million selling Santa hats at $2 a pop. Given that a Santa hat can probably be knocked up in an afternoon by an artist, that’s a pretty impressive margin. (Of course, the company had to build and run a free, multiplayer, fun, kart-racing game to support the sales of Santa hats, but for the purposes of this discussion, that is not the point).

Contrast that to the Rezurrection expansion to Call of Duty Black Ops. That DLC contains new weapons and equipment, new perks, new soundtracks and four levels “re-mastered” for the game. It cost a lot more than just an artist working on a Santa hat for the afternoon.

DLC and virtual goods fulfil a different role

The reason I care about the difference so much is because so much changes depending on whether you are making DLC or a virtual item.

If you are making DLC, your objective is to make a single piece of content that lots of people will want. It is familiar territory to businesses who are used to selling products. You create a product that is expensive to make (increasing risk). You try to appeal to the largest number of people. Success is measured by the number of people who buy it, and everyone buys the same thing. Because the price of the DLC is basically fixed, you define success by the number of copies you sell.

If you are making virtual goods, your objective is to make lots of items that will appeal to different people for different reasons. (Even if you are selling virtual currency, that currency will be used to buy lots of different in-game things). You keep the cost of creating each individual item low to reduce risk. Success is not measured by the sales of an individual item, but by the sales of the spread of items. You define success by Average Revenue Per User, not by number sold or average selling price.

I do see the argument that for a consumer, whether you spend £10 on a farmhouse or on a bigger expansion pack, you’ve still spent £10 for something that you’ve downloaded. For the game makers, the consequences – the risk you’ve taken, the nature of success, the metrics you use to track it, the marketing techniques you need to sell it – are so vastly different that if you don’t understand the difference, you are danger of making some very expensive errors.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com

I do see the argument that for a consumer, whether you spend £10 on a farmhouse or on a bigger expansion pack, you’ve still spent £10 for something that you’ve downloaded.

A Farmville farmhouse or other virtual item isn’t “downloaded” – not in the DLC sense, anyway. A virtual item is hosted on a server somewhere and I am now authorised to access it / it has been assigned to my inventory or farm; a game expansion pack will usually be downloaded to my PC or console.
The former with potential consequences for the consumer who doesn’t understand the difference.

http://www.gamesbrief.com Nicholas Lovell

That’s a really good point. I had thought that the issue was mainly one on the creation side. You make it clear that the consequences for consumers may not be trivial.

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Gamesbrief is a blog about the business of games. We look behind the headlines to tell you not just what is happening to games, but why it matters to your business. From Activision to Zynga, we analyse the companies who are making waves in the games industry and the new platforms, like Facebook, iPhone and Unity, that are changing the market.

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